By Steven Levine
Investors in the week ahead will receive updates on Singapore’s economy and manufacturing sector, as the island nation’s growth faces increasingly heavier headwinds from global trade flows and China’s slowdown.
Singapore’s gross domestic product (GDP) slowed in 2018 from the prior year, with its growth propelled in large part by financial and business services. However, the upbeat performance of those drivers was insufficient to fully offset the drag posed by the trade-related sector and its contraction in IT.
Singapore’s GDP grew by 3.2% in 2018, receding from its 3.9% gain in the prior year. In Q4 2018, the economy expanded by 1.9% year-on-year, down from 2.4% in the previous quarter.
The Monetary Authority of Singapore recently noted that against the backdrop of “a softer external economic environment, particularly the slowing global tech sector, Singapore’s growth drivers will shift from the trade-related to the modern services cluster” in 2019.
The central bank said that improvements in the country’s construction sector and “broadly supportive conditions in the labor market should impart some positive impulse to the domestic-oriented” deceleration.
While domestic activity has remained sluggish, there has been some improvement in Singapore’s construction and food & beverage segments.
All in, the Monetary Authority of Singapore expects the nation’s economy to expand a little below the mid-point of the 1.5–3.5% range in 2019.
Market participants Tuesday are set to receive a fresh gauge on Singapore’s private sector economy in March after contracting somewhat in the prior month.
Tuesday, April 2
- Nikkei Singapore Purchasing Managers’ Index PMI (Mar)
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According to Nikkei / IHS Markit, the contraction – Singapore’s first since September 2018 – fell amid the third straight easing of new business growth, coupled with a sharper reduction in staffing levels. The effects, which contributed to the deterioration in the country’s macroeconomic health, apparently overshadowed a slight increase in output volumes, while export demand diminished.
The headline Nikkei Singapore PMI dipped to a five-month low of 49.8 in February from 50.1 in the previous month.
IHS Markit economist Joe Hayes noted that the “underlying weakness was a reflection of reduced demand on the international front and easing domestic market pressures.” However, he added that despite “the apparent downside momentum,” output expectations remained “well anchored around their long-run average, suggesting that firms expect current difficulties to not persist beyond the near-term.”
Fiscal strategy
In late February, Singapore’s Finance Minister Heng Swee Keat outlined key principles for the government’s fiscal 2019 budget, which aims at enabling its people to “do more with less.”
Heng’s strategy broadly includes increasing workers’ skills to raise the country’s lower-wage earners, strengthening its endeavors in innovation, enterprise, and technology, as well as fostering stronger ties between the government, corporations and unions.
He added that as a “regional hub in many areas, such as finance, professional services, and logistics, we are well-positioned as a base for businesses to capture the growing regional demand for such services. We also continue to have a strong manufacturing base, despite increasing competition from other economies.”
Taking stock
Against the landscape, Singapore’s equities – as evidenced by the iShares MSCI Singapore ETF (NYSEARCA: EWS) – have been regaining some lost ground after plunging more than 19% from September 2019 to about the start of this year.
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The uptick in stocks may also be seen in the Singapore Exchange’s (SGX) offshore supply vessel (OSV) players, which provide support services to offshore drilling rigs, pipe laying and oil-producing assets, as well as other activity associated with the exploration and production (E&P) of oil and gas (O&G).
SGX highlighted that in line with the cost of crude having risen roughly 30% since the start of 2019, prices of its 10 largest OSV stocks, which have a combined market capitalization of more than S$1bn, rebounded nearly 31% on average from their 52-week lows.
Among the strongest gainers have been Amos Group (160.9%), Sinwa Ltd (57.9%), Vallianz Holdings (30.0%), Dyna-Mac Holdings (23.0%), and Baker Technology (9.2%).
SGX noted that it carries 35 OSV stocks.
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Meanwhile, the Singapore Institute of Purchasing and Materials Management (SIPMM) will unveil its Manufacturing PMI for March, after the indicator showed slower expansion in the prior month.
Wednesday, April 3
- SIPMM Manufacturing PMI (Mar)
The February reading of the Singapore PMI declined three-tenths of a point month-on-month to 50.4 – its lowest trough since December 2016.
SIPMM attributed the lower level to slower growth in new orders, new exports, factory output, and inventory, as well as to the employment level. Both indexes of finished goods and imports also recorded slower rate of expansion.
Furthermore, the input prices index reverted to a contraction after having expanded for 18 consecutive months.
The only measure that posted an improvement was the supplier deliveries index, while order backlogs continued to contract for the fifth month.
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Still, with the gauge reflecting continued expansion for Singapore’s manufacturing sector – compared to recent contraction in China, Japan, South Korea, and Taiwan – investors will likely be keeping an eye on any potential further weakness that could further stymie the country’s growth.
In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of the U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more.
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